Temporary assignees to Ireland – new Revenue guidance has been saved
Temporary assignees to Ireland – new Revenue guidance
Updated Revenue Guidance
Where a non-resident individual who holds a non-Irish employment works temporarily in Ireland for a local entity, Irish PAYE implications can arise for either the foreign employer or the local entity.
Revenue guidance on this area has existed since 2007. The 2007 guidance was updated in 2016 and again in 2018 to incorporate certain OECD commentary (which is not reflected in Irish law). While the updated guidance in 2018 clearly set out Revenue’s position, it was broadly unworkable for employers in a practical sense.
Revenue issued updated guidance on 11 December 2019 which inserts a paragraph 4.6 into Chapter 4 of Tax and Duty manual Part 42-04-65 and states:
“With effect from 1 January 2020, for the purposes of determining whether a dispensation from the operation of PAYE is required, employers are required only to consider the number of work days spent in the State in a single year of assessment, that is, in the year of assessment concerned. There is no requirement to consider work days spent in the State in two consecutive years or to be so spent in future years. Further guidance on the operation of this Tax and Duty manual will issue in early 2020.”
This effectively appears to re-introduces a single tax year threshold and removes the multi-year aggregate tests introduced in the earlier guidance. This is a very welcome amendment and removes some of the cumbersome administration for employers when dealing with Short Term Business Visitors (STBVs). There are still significant uncertainties in this area and it is hoped the further guidance expected in early 2020 will clarify these points.
Impact of New Guidance – DTA Temporary assignees from 1 January 2020 - up to 60 workdays per year
The first item to consider is where the individual is tax resident, specifically if the individual is tax resident in a country with which Ireland has a Double Taxation Agreement (DTA) or in a country with which we do not have a DTA (referred to as non-DTA countries). This is important, as separate thresholds apply depending on the country of residence.
The Revenue guidance refers to a single year of assessment and implies this is applicable for STBVs from DTA-countries by reference to the term dispensation. The guidance does not confirm the day threshold in that single year of assessment but it is assumed that the 60 day threshold that exists under the current guidance for one year of travel will apply. We expect this will be clarified in the additional guidance due in early 2020.
It is also unclear when the 60 day threshold is met as to whether there is now no requirement to look at further details relating to the role carried on by the individual in Ireland and that the day’s threshold will be accepted “without question” per Scenario 1 of Section 4.3.1 of the guidance or whether any conditions will be attached.
Impact of New Guidance – Non DTA or Branch Assignees
For those STBVs coming from non-DTA countries or branches (rather than companies), it has not been stated whether the old 30 day rule applies or whether even the multi-year system still applies to non-DTA countries. It is assumed that this is the case but again uncertainty exists.
Previous Guidance Temporary assignees position pre 1 January 2020
For a summary of the prior guidance, please see our prior newsflash here.
If the updated guidance is to be taken at face value, we are now potentially back to a system for STBVs from DTA countries that existed prior to the 2016 guidance. The re-introduction of a single year threshold removes the uncertainty and also the time-consuming administration burden of employees with multiple year travel created by the 2016 and 2018 guidance notes. This provides much needed clarity for employers. It is very welcome that Revenue have provided a practical approach for business travel which will encourage companies to continue bringing temporary assignees and business visitors to Ireland.
While it appears the single year threshold mentioned in the guidance is based on 60 day/30 day test, clarity from Revenue on the number of days would be welcome. There is particular frustration that there was no reference to the old 30 day de-minimus which means that STBVs travelling from branches in foreign jurisdiction (treaty and non-treaty) are still exposed to PAYE after one day’s travel.
Given the level of engagement on this topic, it is unfortunate that Revenue have allowed the uncertainty to drift into 2020. Due to these uncertainties, we have to rely on the assumptions noted above. This is particularly disappointing when the new regime applies from 1 January 2020.
Given the nature of temporary assignments and business travellers, it is not always realistic for employers to be able to identify relevant employees and gather the relevant information required for the applications for release from PAYE obligation within 30 days. In other locations, including the UK, there is a facility to report relevant individuals after tax year end. The 30 day deadline in the Irish guidance is impractical and it appears to be unchanged per the new guidance.
Non-Irish employers should now review all temporary assignments to Ireland to ensure the correct payroll treatment is being applied as this new guidance applies with effect from 1 January 2020. Also, employers should ensure that they have complied with the guidance in place for earlier years.
If you would like to discuss this matter in more detail please feel free to contact your usual Deloitte contact.